United States Senate Special
Committee on Aging

Hearing on Swindlers, Hucksters
and Snake Oil Salesmen:
The Hype and Hope of Marketing Anti-Aging Products to Seniors
September 10, 2001

Prepared Statement of the Federal
Trade Commission

I. Introduction

Mr. Chairman and members of the Committee, I am Howard Beales,
Director of the Bureau of Consumer Protection, of the Federal
Trade Commission. I am pleased to have this opportunity to provide
information concerning the Commission's efforts to ensure the
truthfulness and accuracy of marketing for health products and
services. My comments will focus in particular on our work to
combat fraudulent claims for products marketed as treatments or
cures for serious diseases, many of which are particularly prevalent
among elder citizens, including cancer, heart disease, and arthritis. (1)

The mission of the Federal Trade Commission is to prevent unfair
competition and to protect consumers from unfair or deceptive
acts or practices in the marketplace. As part of this mission,
the Commission has a longstanding and active program to combat
fraudulent and deceptive advertising claims for health products. (2) Since the fall of 1997, the Commission
has filed twenty-seven cases against companies using false or
deceptive claims to market unproven products that allegedly cure
such ailments as cancer, arthritis, sleep apnea, impotence, osteoporosis,
or circulatory diseases.

Despite these efforts,
unfounded or exaggerated health claims remain common in the marketplace,
and combating health fraud remains one of the Commission's top
priorities. Cooperative law enforcement that focuses on marketers
who promote products that jeopardize the health of users as well
as those who make unfounded therapeutic claims for serious diseases
is a keystone of that effort. Although aggressive law enforcement
is crucial, the best consumer protection comes from preventing
consumers from being deceived in the first instance.

Thus, the Commission
emphasizes consumer education to help consumers spot and avoid
health fraud. Finally, we also work to provide businesses with
the guidance necessary to avoid violating the law.

We believe these
efforts are important because health fraud often targets a very
vulnerable segment of our population -- those suffering from serious
or incurable health conditions and diseases. The victims are often
fearful and desperate. As one commentator observed, "[I]t
is difficult to explain, and often impossible to comprehend, the
degree of suffering seen in some cancerous conditions, cases of
arthritis, and certain nervous disorders."
(3) In such circumstances, therapeutic claims, even
outrageous claims that ordinary consumers would dismiss as fraudulent,
can be and are convincing enough to persuade consumers to purchase
these products.

In other circumstances,
a number of factors, including lack of information and false beliefs
about health and the causes of disease, may also contribute to
a particular consumer's susceptibility to health fraud.
(4)

II. Consumer Injury

At the consumer
level, the costs of these products and services range from a few
dollars to tens of thousands of dollars for cancer treatments
offered in foreign "clinics." In most cases, these products
and services are not covered by insurance.

In addition to
economic injury, some products and services can pose a serious
health threat. The promise of worthless or unproven remedies can
deter victims from seeking the best available treatments. In some
instances, particularly in the area of cancer, marketers have
even told victims that it is not necessary for them to seek conventional
treatment. For example, one website for an unproven treatment
told consumers:

Does this mean
you can cancel your date for surgery, radiation and chemotherapy?
YES! After curing your cancer with this recipe it cannot come
back. THIS IS NOT A TREATMENT FOR CANCER: IT IS A CURE! But if
you do not wish to make your doctor angry, you could follow her
or his wishes, too. Be careful not to lose ANY VITAL ANATOMICAL
PARTS in surgery though, because you may need them later when
you are healthy! (5)

In some patients,
delaying treatment may worsen the condition.

Deferred treatment
is not the only risk, however; some products and services are
themselves dangerous. This is a concern the Commission takes very
seriously. Safety is a primary criterion the Commission uses in
its case selection process, as illustrated by our recent cases
against marketers of products containing comfrey, an herbal product
that, when taken internally, can lead to serious liver damage. (6)

III. Law Enforcement

The Federal Trade
Commission, Food and Drug Administration, U.S. Postal Service,
and state law enforcement and regulatory agencies all play a role
in protecting consumers, especially seniors, from health fraud.
Over the years, there has been a high degree of cooperation among
these agencies, including the sharing of information and technical
and scientific expertise as well as the coordination of law enforcement
efforts. For example, to combat health fraud on the Internet,
the Commission initiated Operation Cure.All,
(7) a comprehensive consumer and business education
and law enforcement and regulatory initiative targeting deceptive
and misleading Internet promotion of products and services as
cures or treatments for serious diseases. In addition to the FTC,
participants in Operation Cure.All include the Food and
Drug Administration, (8) several
state attorneys general, and Health Canada.

The initial phase
of Operation Cure.All consisted of two Internet surfs (9) conducted in 1997 and 1998. As
a result of these surfs we found over 1600 sites world-wide making
questionable claims for products marketed as treatments for heart
disease, cancer, HIV/AIDS, diabetes, arthritis, and multiple sclerosis.
Of these, over 800 were located in North America, with the vast
majority in the United States. To put these numbers in perspective,
it took surfers only about 3 hours each to find these sites, which
we believe represent only the tip of the iceberg. The results
from these surfs were used to identify areas for targeted law
enforcement, e.g., magnetic therapies, and, as discussed
below, in our industry education efforts.

This year, the
Commission has filed eight cases as part of Operation Cure.All,
targeting companies that market a variety of devices, herbal products,
and other dietary supplements to treat or cure cancer, arthritis,
Alzheimer's, diabetes and many other diseases. Among the products
for which marketers made unsubstantiated health benefit claims
were a DHEA hormonal supplement, St. John's Wort, various multi-herbal
supplements, colloidal silver, comfrey, and a variety of electrical
therapy devices. (10)

The following are
illustrative of the kinds of claims that the Commission challenged
in its Operation Cure.All cases this year:

THIS IS NOT A TREATMENT
FOR CANCER: IT IS A CURE! . . . It takes 5 days to kill the parasites
that cause intestinal cancer. The cancer is then killed . . .
. (herbal product)

We cannot list
all 650 diseases that colloidal silver is effective against but
here is a list of some of the common ones: Common cold, stomach
ulcers, acne, burns, shingles, arthritis, strep, tuberculosis
. . . (colloidal silver)

[T]here are . .
. literally hundreds of scientific studies supporting the components
of this breakthrough formula. Here are some of the most dramatic
new findings. . . . And finally, a breakthrough study on nearly
1,000 subjects published in the prestigious journal of epidemiology
showing a significant reduction in the risk for atherosclerosis.
. . . the leading cause of death in Western nations. (anti-aging
DHEA product)

Herb Veil 8 has
been used in the successful removal of carcinoma, adenocarcinoma,
and melanoma. (botanical product)

This formula is
a "power house" and has been used on (and restored to
health), cancer of the spine, arthritis, and polio, and has helped
rebuild torn cartilage and sinews, fractures, etc. etc..."
(product containing comfrey)

Prior to this year,
the FTC had filed eight Operation Cure.All cases. The
challenged products include Cat's Claw,
(11) shark cartilage, (12)
cetylmyristoleate (CMO), (13)
Essiac Tea, (14) and magnetic
therapies. (15) In all these cases
the companies made strong claims about treatments or cures for
serious diseases with little or no evidence to support the claims. (16)

Other Commission
initiatives include conducting Internet investigation training
courses for more than 2000 individual law enforcement staff, including
representatives of 20 countries, 30 states, and 22 federal agencies.
The Commission also maintains a comprehensive consumer complaint
data base, Consumer Sentinel. Complaints come into the system
through telephone and mail inquiries to our Consumer Response
Center as well as through our online complaint form at www.ftc.gov.
Complaints are also forwarded to the system from many public and
private partners. Complaint information in the system is available
to over 300 law enforcement agencies.

While the Internet
Training Course and Consumer Sentinel cover many more areas than
health fraud, these initiatives have contributed significantly
to law enforcement efforts in the health area as well. For example,
the Internet training we provide to health fraud investigators
at federal and state agencies improves efficiency in conducting
investigations of Internet companies marketing questionable products.
In addition, Consumer Sentinel has become a valuable source of
leads and other information about companies that may be engaged
in deceptive marketing of health products.

The FTC is committed
to obtaining strong remedies that will adequately protect consumers
against health fraud. As already noted, the provisions of the
Federal Trade Commission Act empower the Commission to prevent
unfair or deceptive acts or practices in or affecting commerce (17) and false advertisements for
foods, drugs, devices, cosmetics and services.
(18) In addition to prohibiting false claims, these
provisions require, in most cases, that marketing claims about
the efficacy or safety of a health-related product or service
must be supported by competent and reliable scientific evidence. (19) In general, competent and reliable
scientific evidence consists of tests, studies, or other scientific
evidence that has been conducted and evaluated according to standards
that experts in the field accept as accurate and reliable. (20)

Given the number of companies marketing health products and our
limited resources, we cannot investigate and prosecute every possible
case. Factors that are considered in case selection include (1)
the safety of the product or service, (2) whether the product
or service is being marketed as a treatment or cure for a serious
disease or health condition, (3) the egregiousness of the claims,
(4) the scope of the marketing and sales, and (5) the extent to
which bringing a particular case will serve the Commission's industry
compliance and consumer education mission.

Enforcement actions
can take one of two forms. The Commission can file an administrative
action or it can file its action directly in federal district
court. Federal district court actions are particularly appropriate
where the case involves a potentially unsafe product, or when
immediate injunctive relief is necessary to stop an ongoing deceptive
advertising campaign or to preserve assets for consumer redress.
In either case, the Commission may seek broad remedial relief. (21)

In addition to
prohibiting specific deceptive product claims, Commission orders
in the health area typically prohibit unsubstantiated claims for
other foods, drugs, dietary supplements, devices or services.
In cases where a company utilizes third party distributors, Commission
orders often require the company to notify its distributors of
the Commission's action and to monitor future advertising. Where
appropriate, the Commission attempts to obtain the payment of
consumer redress or, where redress is impractical, disgorgement
of ill-gotten gains to the U.S. Treasury. Also, in appropriate
cases, the Commission may order a company to undertake a specific
consumer education program. For example, in the Commission's action
against a company marketing a product known as Essiac Tea
(22) as a scientifically proven cancer cure, the Commission's
consent order required that the company send notices to past purchasers
advising them that there is no reliable evidence that Essiac Tea
is effective against cancer. (23)

IV. Consumer and Business Education

The Commission
recognizes that the primary goal of consumer protection is to
prevent consumers from being injured. For that reason, the Commission
maintains a comprehensive consumer education program. Today we
are releasing a publication produced with the FDA, called "Miracle
Health Claims: Add a Dose of Skepticism." This brochure provides
specific information about the efficacy and safety of popular
products as well as information about spotting and avoiding health
fraud. Another brochure, "Who Cares: Sources of Information
About Health Care Products and Services," published jointly
with the National Association of Attorneys General, informs consumers
about where they can go for information about arthritis cures,
alternative medicine, and other health issues, and where they
can file complaints about health fraud. The Commission also works
with other federal agencies, like the Administration on Aging,
and organizations like the AARP, to get our health fraud messages
to older audiences.

The Commission
also uses the Internet to distribute its consumer education messages.
The Commission's Website, www.ftc.gov, provides links to reliable
sources of health information, including www.healthfinder.gov,
developed by the Department of Health and Human Services, and
consumer education tips such as those found in "Virtual Health
Treatments Can Be Real World Deceptions."
(24) Our web-based consumer education material has received
nearly 80,000 accesses since October 1, 2000. These materials
are also available in printed form. In addition, the Commission
maintains a number of "teaser" sites like "Arthriticure,"
"Virility Plus," and "Nordicalite," which
can be found using common search engines and are set up to mimic
health fraud sites. When consumers attempt to order the products,
however, they get a message that if the site were real, they could
have been scammed. Then, most importantly, consumers are advised
of the tip-offs that the site was a scam and where to turn for
reliable information. The Commission's three health-related teaser
sites have received over 20,000 accesses from October 1999 through
August 2001.

The Commission
engages in an extensive industry education campaign. For example,
in 1998 the Commission published "Dietary Supplements: An
Advertising Guide for Industry." (25)
This publication provides easy-to-understand explanations of advertising
standards for the marketing of health products, along with many
useful examples. In addition, Commission staff has sent more than
a thousand email advisories to websites that are making questionable
therapeutic claims. These emails alert website operators to the
questionable nature of their claims and provide links to resources
to help them determine whether they are in compliance with applicable
law. Based on our random sampling of sites that have received
these advisories, approximately 25% take some form of remedial
action, either taking the website down or removing the questionable
claims.

V. Conclusion

Health
fraud poses a direct and immediate threat of both economic and
physical injury to persons already suffering from serious conditions
and diseases. The elderly are particularly vulnerable because
of the high incidence of health-related problems in this age group.
With thousands of marketers pushing worthless or unproven remedies,
and limited enforcement resources, there is reason for concern.

On the positive
side, consumers now have more accurate, reliable health information
available to them, through the Internet and other sources, than
ever before, and consumer surveys show that consumers are using
these resources in record numbers. (26)
Federal and state agencies, as well as many of our foreign counterparts,
recognize the need to coordinate and share scarce resources in
the battle against health fraud. As our past experience demonstrates,
this cooperation is an absolutely essential ingredient of success.
The Commission will continue its aggressive law enforcement and
consumer and industry education program to combat health fraud,
and to the extent possible, increase its efforts in this critical
area of consumer protection.

Endnotes

1 The written statement presents
the views of the Federal Trade Commission. My oral statement and
responses to questions are my own and are not necessarily those
of the Commission or any individual Commissioner.

2 Our authority in this area
derives from Section 5 of the Federal Trade Commission Act, which
prohibits "unfair or deceptive acts and practices" in
commerce and Section 12, which prohibits the "false advertisement"
of foods, drugs, devices, services, and cosmetics.15 U.S.C. ßß 45,
52.

7"Operation Cure.All"
Targets Internet Health Fraud: FTC Law Enforcement and Consumer
Education Campaign Focuses on Stopping the Quacks and Supplying
Consumers with Quality Information, June 24, 1999, available
at http://www.ftc.gov/opa/1999/9906/opcureall.htm.

8 As part of the Operation
Cure.All initiative, FDA filed an action seeking a permanent
injunction against a website operator selling products containing
shark cartilage, a glycoalkaloid, and arabinoxylana as treatments
for cancer and other serious diseases; sent 48 Cyber Letters,
untitled letters sent via electronic mail, to sites making drug
claims for colloidal silver; issued warning letters to several
firms marketing devices that purportedly send electrical energy
into the body to destroy parasites and/or shatter cells to cure
serious diseases, such as cancer; and issued public warnings about
products containing aristolochic acid, a toxic contaminant, and
comfrey.

9 In an Internet surf, participants
use common search engines to find relevant Internet sites based
on a set of predetermined search terms, for example, "cancer
therapy." Once a site is identified, it is forwarded to a
collection center, where the site is reviewed again to verify
that it satisfies the selection criteria. In the two health claims
surfs the FTC organized, the selection criteria were whether the
site appeared to be making questionable claims that the product
or service being offered was effective in the treatment, prevention
or cure of cancer, arthritis, heart disease, HIV/AIDS, diabetes,
or multiple sclerosis.

17 15 U.S.C. 45(a). A representation,
omission, or practice is deceptive if (1) it is likely to mislead
consumers acting reasonably under the circumstances; and (2) it
is material, that is, likely to affect consumers' conduct or decisions
with respect to the product at issue. FTC Deception Policy Statement,
appended toCliffdale Associates, 103 F.T.C.
174, 175-76 (1984), available at http://www.ftc.gov/bcp/policystmt/ad-decept.htm.
A practice is unfair if the injury to consumers it causes or is
likely to cause (1) is substantial; (2) is not outweighed by countervailing
benefits to consumers or to competition; and (3) is not reasonably
avoidable by consumers themselves. 15 U.S.C. ß 45(n);
see also Unfairness Policy Statement, appended toInternational Harvester Co., 104 F.T.C. 949, 1070 (1984),
available at http://www.ftc.gov/bcp/policystmt/ad-unfair.htm.

18 15 U.S.C. ß 52.
''False advertisement'' is defined as "an advertisement,
other than labeling, which is misleading in a material respect;
and in determining whether any advertisement is misleading, there
shall be taken into account (among other things) not only representations
made or suggested by statement, word, design, device, sound, or
any combination thereof, but also the extent to which the advertisement
fails to reveal facts material in the light of such representations
or material with respect to consequences which may result from
the use of the commodity to which the advertisement relates under
the conditions prescribed in said advertisement, or under such
conditions as are customary or usual." 15 U.S.C. ß 55(a)(1).

20See, e.g.,
Michael D. Miller, No. C-3941 (May 16, 2000) (consent),
which defines "competent and reliable scientific evidence"
as: tests, analyses, research, studies, or other evidence based
upon the expertise of professionals in the relevant area, that
has been conducted and evaluated in an objective manner by persons
qualified to do so, using procedures generally accepted in the
profession to yield accurate and reliable results.

21 In order to prevent the responsible
individuals from evading a Commission order simply by forming
a new corporation, FTC orders frequently cover both the corporation
and the individuals in the corporation who controlled or participated
in the deceptive or fraudulent practice.

24 "Virtual Health Treatments
Can Be Real World Deceptions," available at http://www.ftc.gov/bcp/conline/edcams/miracle/index.html.

25 "Dietary Supplements:
An Advertising Guide for Industry," November, 1988, available
at http://www.ftc.gov/bcp/online/pubs/buspubs/dietsupp.htm. Since
its publication, 11,125 copies of the Guide have been distributed
and it has been accessed on our website 91,900 times.

26 According to one survey,
almost 100 million Americans have used the Internet to find health
information, on average three times per month. Humphrey, T; "Cyberchondriacs
Update," Harris Interactive, April 18, 2001, available at
www.harrisinteractive.com/harris_poll/index.asp?PID=229. In most
instances, users are looking for information about specific conditions
or diseases.